Running Your Business From Home? You Might Be Leaving Money on the Table.

Who This Post Is For

If you’re self-employed and work from home—whether it’s in a full room or a designated nook—and haven’t claimed the home office deduction, or if you have and didn't claim everything you are eligible for, this post is for you. Read on to maximize your deduction.

The Two People Likely Reading This Right Now

There are two types of people who end up not claiming the home office deduction they're entitled to, and they arrive there from completely opposite directions.

Person 1 has already disqualified themselves before even asking what’s possible — they're a renter, have roommates, or don't have a separate room with a door that closes.

Person 2 knows the deduction exists but is quietly doing penance for their own humanity: they filed their nails at their desk before a client call once, or their sick kid camped out on the office sofa while they finished a proposal, and now they're claiming 60% of what they're actually owed for an incident of non-exclusive use.

Both of these people are leaving money on the table for reasons the IRS did not intend.

What the IRS Actually Means by "Exclusive Use"

The IRS cares about whether your space is used for business, not if it’s picture-perfect. "Exclusive use" means the space serves your work consistently. As long as you treat it as a workspace—even if it’s also in your living room—you’re likely eligible.

A therapist who puts real time and attention into building a telehealth backdrop that puts clients at ease by choosing art and colors with her professional context in mind, and has no other space to do her admin work? She has built a compliant home office. She just didn't have the vocabulary for it yet.

A graphic designer with a dedicated work area in his family room—his footprint, his tools, nobody else's homework happening there—has a home office.

You don’t need four walls and a locked door, just intent and boundaries.

"Ordinary and Necessary" — Translated

The IRS uses a two-word test for business expenses: ordinary and necessary. In plain language, that means: Is this reasonable in your line of business and needed for the work you do?

A landscape designer buying a book on English gardens is making a business purchase. An accountant buying the same book is probably feeding a new special interest—same book, very different context.

A good rule of thumb is: Don't use your business to justify an expense. Intention precedes purchase, not the other way around. The IRS assumes you are in business to make a profit. So, ask: Does this (notebook, course, equipment, etc.) help you do that? If so, claim it.

What Actually Draws Scrutiny (And What Doesn't)

Eating string cheese at your desk between client meetings won’t get you audited for breaking the "exclusive use" requirement. But telling the IRS that 85% of your home is your office might. This is especially true if it’s only because you sometimes take pictures of your living room, paste quotes on top, and share them on Instagram. Also, claiming a $15,000 home office renovation after reporting $1,500 in Schedule C income for a few years falls into the "risky" category.

Bottom line, our perception is skewed because the news usually reports on the most flagrant violations: misrepresentation, fraud, tax evasion, etc. A snack break in your telehealth corner doesn’t make you a lawbreaker. The IRS looks for consistency and honesty—not perfection. You’re not Al Capone. Take your snack break.

The Part We Don't Talk About Enough—What You Can Actually Deduct

The home office deduction takes into account the costs of making your office space usable for your business. The business share of your rent or mortgage interest, utilities, internet, insurance, property taxes, and even cleaning services. If it’s tied to your home office space, it’s a home office deduction. You claim a percentage based on your office’s size compared to your whole home.

Here’s how the deduction calculation works in practice: First, measure the square footage of your home office and the square footage of your entire home. Next, divide your office area by your total home area to get a percentage. For example, if your office is 100 square feet and your home is 1,000 square feet, your home office represents 10% of the total space.

You can then deduct 10% of eligible household expenses, such as utilities, rent or mortgage interest, insurance, and cleaning services. This straightforward method ensures your deduction accurately reflects the proportion of your home used for business purposes.

The cleaning service example is worth highlighting to helip explain what makes an expense eligible: a clean office is a functional office, and maintaining your equipment and workspace are requirements for running a professional business. Few people point that out because it seems mundane or obvious. It isn't, so go get that deduction.

A Note on the Advice Circulating Out There

There is a piece of advice making the rounds on social media that goes something like this: rent coworking or office space, but keep claiming your home office too.

If your rented office space covers everything your business needs, you do not have a home office deduction, and pretending otherwise is not a tax strategy; it's trying to make fraud the “One trick the IRS doesn’t want you to know!”

That said, there is a legitimate version of this: a therapist who subleases office space only to see clients in person and cannot use that space for billing, notes, administrative work, or telehealth sessions. Her home office covers the rest of her workflow, so she legitimately has both. The difference is in the workflow. Sit down and actually map out how you work, because that map is also your deduction documentation.

Staying Audit-Ready Without Overthinking It

The habits that keep you compliant are basic home business hygiene: measure your home and office, organize your bills, and keep your receipts.

Some key records to keep are utility bills, rent or mortgage statements, insurance documents, and maintenance and cleaning invoices. Keep these handy for a paper trail and to back up your expenses if needed.

Don’t use your workspace for personal or family activities. And at the end of the day, step away from your office. Maintaining a boundary between work and home keeps you in compliance with the IRS rules around home offices, and as a bonus, it's an excellent form of self-care.

Something to try this week:
Measure your workspace and your home’s square footage if you haven't already. Write down the numbers. If you are unsure what counts as your office, use painter's tape to outline where you work, then measure that space. That number is the foundation for your deduction, and it takes about fifteen minutes to get right.

Food for thought:
If you had to describe your workspace to someone who had never seen it, would it sound like business gets done there? Does it convey what you do and how you use it? If so, the IRS would likely agree.

How to bring this up with your accountant (or bookkeeper, or tax pro):
You do not need everything to be perfectly sorted to reach out for guidance. Start with your square footage, a rough list of monthly house expenses, and a description of how your workspace fits your business.

If you're considering home improvements, ask your accountant before your project starts. Upgrades like painting, repairing windows or floors, adding lighting, or fixing outlets in your office may be deductible if they directly benefit your workspace. Your accountant can confirm which improvements are eligible for the deduction and advise on what should be noted on the contractor’s invoice.

Suggested reading and tools:

• IRS Publication 587, Business Use of Your Home, is more readable than it sounds, and it’s the primary source for what the IRS actually requires
• IRS Form 8829 and its instructions: if you use the regular method rather than the simplified method, this is where the calculation lives
• A simple floor plan sketch tool (even graph paper) or a camera and painter's tape to document your square footage; keep the measurements with the rest of your home office receipts and tax records